The Shock Economics of Austerity have Targeted the Poor to Disastrous Effect

A damming report from the United Nations Rapporteur on Poverty has condemned the UK’s austerity policies as ‘punitive, mean-spirited and often callous’. Stephen McCloskey argues that the shock economics of austerity have been used to implement devastating new welfare policies that have hit the most vulnerable hardest.

Rarely has a United Nations report on poverty so squarely and uncompromisingly laid bare the devastating consequences of austerity policies as is the case in a scathing new broadside to the British government from Philip Alston, the UN Rapporteur on Extreme Poverty and Human Rights. We normally expect reports from the United Nations to be couched in anodyne language carefully calibrated to make their point with the least possible offence. Not so the report by Alston, who has described Britain’s austerity measures as ‘punitive, mean-spirited, and often callous’. Quoting the Institute for Fiscal Studies, which predicts a 7 percent rise in child poverty to as high as 40 percent by 2022, Alston argues that ‘For almost one in every two children to be poor in twenty-first century Britain is not just a disgrace but a social calamity and an economic disaster, all rolled into one’.

The Rapporteur’s report is an assessment of the impact of eight years of austerity in the UK under the Conservatives in the wake of the 2008 economic crisis, particularly focusing on the social security system and the gradual dismantling of the social safety net for vulnerable people. Rather than being compelled by economic necessity, the report says that the government’s austerity drive was designed to achieve ‘radical social re-engineering’. With echoes of Naomi Klein’s ‘shock economics’ whereby governments manipulate the disorientation of major disasters to impose drastic economic ‘reforms’, the 2008 economic crisis in Britain appears to have been used as cover to implement wholesale reform of the benefit system.

Punitive welfare

The idea of benefit harmonisation on the face of it seemed like a positive step to streamline the system but the introduction of Universal Credit has been a bitter throwback to the Victorian concept of punitive welfare. Far from easing the plight of those forced to file a claim, Universal Credit has exacerbated poverty with a five-week delay between claim and payment. The rapporteur found that payments can sometimes take up to 12 weeks which pushes the claimant into ‘debt, rent arrears and serious hardship’. Minor infringements, such as missing an appointment in a social security office, can result in sanctions which will shut the claimant out of benefits for weeks or even months. But perhaps the most controversial ‘reform’ has been the limitation of child tax credits to the first two children only with an exemption being applied if the conception of the third and any further children resulted from the rape of the claimant. Little wonder that Darren McGarvey believes that the ‘the poor are effectively chaperoned around their own lives by the middle class’.

Foodbanks

For those cast into the nightmare world of benefit sanctions or stuck in the limbo between claim and payment, their only recourse may well be foodbanks. The Trussell Trust, which operates a foodbank network across the UK, distributed 1.3 million three-day emergency food supplies to people in crisis between April 2017 and March 2018, a 13 per cent increase on 2017, with 484,026 of these supplies going to children. There are 2,000 foodbanks in the UK and an Increasing number of users are the ‘in-work poor’ with 60 percent of those living in poverty in the UK in families where someone works. For example, in September 2018, the health union Unison announced it was distributing foodbank vouchers to health workers in two hospitals in Belfast who were ‘struggling to put food on the table’. As the Rapporteur argues, foodbanks cannot do the government’s job and teachers ‘shouldn’t be responsible for ensuring their students have clean clothes and food to eat’.

The government bases its welfare strategy on the need to move people from benefits into employment and reduce public expenditure on welfare. However, this strategy is undermined by the out-workings of welfare reform and austerity. Pay freezes and benefit caps mean that salaries for the working poor are unable to keep pace with increases in utility and food prices, clothing and rent. It drives more people into poverty which in turn leads to increases in public expenditure on services. The Rapporteur quotes the Joseph Rowntree Foundation which estimates that £78 billion per year is spent on alleviating poverty which excludes the £1 in every £5 spent on benefits. As McGarvey’s searing portrait of poverty in Scotland, Poverty Safari, argues poverty is the ‘factory floor’ of social problems such as addiction, child abuse, hunger and mental health illnesses, and we are spending more on helping people deal with the effects of poverty than we are saving in welfare cuts.

A mantra of the reformed social welfare system is ‘digital by default’ but the Rapporteur finds that just over half of claimants are able to apply online for benefits without assistance and those that require assistance are unable to find it. This is partially the result of 340 libraries closing between 2010 and 2016 as a consequence of austerity cuts and an erosion of local government. Libraries are, for many, the first port of call if they need computer access and support, but this community hub is being stripped away.

Brexit

Compounding the problems created by austerity is the political and economic uncertainty that has characterised two years of Brexit negotiations which the Rapporteur finds has already ‘increased the cost of living for people by £400 pounds per year’ because of the devaluation of Sterling. He argues that ‘the impact of Brexit on people in poverty is an afterthought’ with the current lack of clarity on the potential outcome of Brexit ‘preventing families at risk of poverty from planning for its impact’. The Rapporteur quotes the International Monetary Fund as suggesting that the worst case scenario of a no-deal Brexit could cost the UK between 5 and 8 percent of its Gross Domestic Product, ‘representing a loss of thousands of pounds per household’. Perhaps, most worryingly of all, is the fact that British politics has been side-tracked into endless discussions and bitter wrangling over the terms of Brexit which has diverted energies and focus from the deepening poverty crisis in the UK.

Poverty trends

Confirming the poverty trends identified by the Rapporteur’s report is the Joseph Rowntree Poverty Report for 2018 which focuses on children and workers. The report headlines are alarming and reveal that 4.1 million children and four million workers in the UK are living in poverty, and in-work poverty is rising faster than employment. In pointing to anti-poverty measures that the government could put in place to reverse these trends, the report argues that:

“Unlocking access to better paid work, enabling more families to live in low-cost rented homes and strengthening support through the social security system are all strategies which have been shown to reduce poverty”.

The UN Rapporteur concludes his report with an explicitly causal relationship between political decision-making and worsening inequality.‘Poverty is a political choice’ he argues, adding that ‘austerity could easily have spared the poor, if the political will had existed to do so’.This is an unsparing critique of a failed economic model inflicted quite specifically on the most vulnerable:women, minority ethnic communities, children, single parents and people with disabilities.Even the IMF, a body closely associated with the neoliberal agenda and economic orthodoxy underpinning the UK’s model of growth, has argued that austerity threatens to be self-defeating.Three of their economists have said:

“The increase in inequality engendered by financial openness and austerity might itself undercut growth, the very thing that the neoliberal agenda is intent on boosting. There is now strong evidence that inequality can significantly lower both the level and the durability of growth”.

In July 2016, when she was elected leader of the Conservative Party and became Prime Minister, Theresa May described her vision of ‘a country that works not for the privileged few but that works for every one of us’.Two years on amid the upheaval of Brexit and her chaotic, divided government, poverty has become rife in the UK and underlying trends suggest it’s going to worsen without a change in economic policy.Geraldine Van Bueren argues that poverty and foodbank dependence ‘ought to be a source of national shame and parliamentary action’ but appears to have become a new normal.It is perhaps reflective of the apparent parliamentary ambivalence toward poverty that she argues for an enshrined right in all public institutions for ‘adequate nutritious food’.This would seem to be a minimal step in the right direction toward an acknowledgement of the scale and scandal of poverty in our midst.

Stephen McCloskey is Director of the Centre for Global Education, a development non-governmental organisation based in Belfast. He is editor of Policy and Practice: A Development Education Review, an online, open access, peer reviewed journal, and co-editor of From the Local to the Global: Key Issues in Development Studies (Pluto Press, 2015). He manages education projects in the Gaza Strip, Palestine and writes regularly on a range of development issues for books, journals and online publications.